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Question 1

powers of trustee

Answer 1

1) look to trust documents first
2) if silent, go to statute and common law
3) if trust is silent, grant trustee all those powers necessary to act as a reasonably prudent person in managing the trust (power to sell/transfer trust prop; enter into a lease or a K; pay taxes and reasonable expenses; sever or consolidate trust prop)

Question 2

T’s duties

Answer 2

• loyalty
• care
• act in the best interest of the B when investing and managing trust
• any B has standing against the T to enforce the fiduciary duty
• such standing grows out B’s equitable interest

Question 3

good faith standard

Answer 3

loyalty= objective (was T reasonable)

good faith= subjective (did T act in GF)

Question 4

no self-dealing

Answer 4

• T cannot profit from self-dealing
• cannot do business with trust
• breach per se of duty of loyalty

Question 5

No further inquiry

Answer 5

• once self-dealing is established, court will not inquire into the T’s reasonableness or good faith
• even if trust documents authorize self-dealing transaction must still be reasonable and fair for the trustee to avoid liability

Question 6

Duty of care/prudence

Answer 6

• in a trust setting, standard care is that which a person of ordinary prudence would practice with his own estate
• should treat as if it’s his own prop
• at common law, could not delegate this to a 3P
• modern law permits deleations if it would be unreasonable for settlor to expect T to undertake such functions (T must still oversee process)

Question 7

conflict of interest

Answer 7

-if T enters into a non-self dealing conflict of interest, the conflict is assessed under the reasonable and good faith test

Question 8

Investments

Answer 8

• at CL trustees were limited to specific list of acceptable investments. T breached if she departed from the list of acceptable investments
• Modern rule (TX)- prudent investor rule- T ha the discretion to invest and manage the trust prop as would a prudent investor

Question 9

Prudent Investor rule applied

Answer 9

• T is expected to diversify assets as to spread the risk of loss
• make trust prop as productive as possible
• measure investments by looking at portfolio as a whole not by looking at individual investments (portfolio approach)

Question 10

duty if impartiality

Answer 10

• in a trust with successive interests, (present and future) T has a duty to balance competing interests of the different classes of B
• demands allocation be balanced to treat life tenant and remaindermen the same

Question 11

life tenatn

Answer 11

-normally entitled to trust income

Question 12

remainderman

Answer 12

-normally entitled to trust principal

Question 13

traditional approach to allocations

Answer 13

• $ generated by trust prop= income

- $ generated in connection with conveyance of trust prop was prinicpal

Question 14

modern approach to allocations

Answer 14

• UNniform principal and income act
• sets a standard of looking at the total return on the portfolio, regardless of classifications of income or principal
• T recharazterizes items and reallocates investments as necessary to fulfill trust purposes as long as its reasonable

Question 15

admin duties

Answer 15

• T has a duty to inform B about he nature of the trust prop
• t muts give B sufficient information so they can enforce their rights
• T has a duty to account for actions taken on behalf of the trust (T’s duty to report on the health of the trust’s portfolio; usually once a year)